Arkansas Business Litigation Lawyer & Attorney : Allen Law Firm : Serving Little Rock, Fort Smith, North Little Rock

A new patent infringement lawsuit was filed in the Eastern District of Arkansas. MidSouth Metal Products, Inc. v. O.D. Funk Manufacturing, Inc., No. 07-602 (filed 6/29/07). See full complaint here.

MidSouth owns a patent for a metal framing system. The complaint alleges a single claim of patent infringement against O.D. Funk Manufacturing, a North Little Rock company. The complaint was not accompanied with a motion for preliminary injunction.

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The Arkansas Supreme Court affirmed Hempstead County Circuit Judge Duncan Culpepper's grant of class certification in Johnson's Sales Company, Inc., et al. v. Wanda Harris, et al., No. 2006-1237. The Allen Law Firm serves as class counsel.

Harris is a class-action usury case against a group of corporations that own and operate Johnson's Warehouse Showroom in several Arkansas communities. The case alleges that Johnson's customers were charged usurious rates of interest. The customers signed Purchase Agreements that state, on their face, an "Annual Percentage Rate" greater than the applicable maximum rate of interest at the time the agreement was signed.

The opinion, written by Justice Corbin, rejects Johnson's arguments that "the circuit court abused its discretion in finding that the Rule 23 requirements of (1) commonality, (2) predominance, and (3) superiority were met."

The Court rejected Johnson's arguments that the Purchase Agreements at issue should be characterized as "retail installment contracts with pre-computed interest" and as such, the "true" interest rate charged depended on the history of payments under the note.

Justice Glaze wrote a dissenting opinion, which Chief Justice Hannah joined.

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An award of punitive damages was affirmed but remitted in Jim Ray, Inc. v. Duane Williams, No. 06-789 (6/27/07).

The case is another gem of an opinion from Court of Appeals Judge Price Marshall. It applies the federal due-process limitations on punitive damages derived from BMW of America v. Gore, 517 U.S. 559 (1994), among other cases, in the context of a relatively small-value sale of a pickup truck.

The opinion also contains the well-written judicial turn of phrase:

"As tempered by our common law and statutes, the salutary principle of caveat emptor is not a license for deceit." 

In 2005, Mr. Williams purchased a 2004 Nissan truck from Jim Ray Nissan. The sticker price was $29,700. However, the total invoice price was $34,125.87. When Mr. Williams pointed this out to Austin Cauthron, the finance manager, Cauthron told him that figure reflected points or credits rather than dollars. Cauthron also told Mr. Williams he was required to buy an extended warranty.

Mr. Williams filed suit for violation of the Arkansas Deceptive Trade Practices Act. A.C.A. § 4-88-101, et seq.The jury awarded him $4,425.87 in compensatory damages and $75,000 in punitive damages. After a thorough discussion of punitive damages, the court of appeals remitted the punitive damages award to $30,000.

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The Arkansas Court of Appeals reversed summary judgment in Cavalry SPV, LLC v. Anderson, No. 06-1370 (6/27/07).

Cavalry SPV purchased Anderson's delinquent credit card account from Midfirst Bank. The trial court, misinterpreting Danner v. Discovery Bank (previously posted 5/17/07), held that Ark. R. Civ. P. 10(d) required Cavalry to produce actual charge slips. Cavalry did not have these slips, although it did have a signed application and other documents. The trial court granted summary judgment to Anderson.

The court of appeals reversed, clarifying that Danner does not require charge slips to prove authorized charges on credit card accounts.  

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The District Court of Nebraska quashed a subpoena to depose an expert witness in Intervet, Inc. v. Merial Limited, 2007 WL 1797643 (D. Neb. 6/20/07).

This case features a long-running patent infringement dispute between Merial Limited and Intervet. The initial case was filed in Georgia but later dismissed on procedural grounds. The current action is in the District of Columbia.

In the Georgia case, Intervet retained Dr. Fernando Osorio as an expert witness. Dr. Osorio never testified, but Intervet did present his declaration at the preliminary injunction stage. In the D.C. action, Intervet has retained another expert whose opinion differs from that offered in Dr. Osorio's declaration.

Because Intervet has not retained Dr. Osorio for the present case, the court concluded it would be unnecessarily time consuming and costly for him to comply with the subpoena. However, the court noted his declaration was a public record that Merial is welcome to use to examine or cross-examine witnesses in the D.C. action.

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The Eastern District of Missouri compelled production of the parent company's financial documents in Orthoarm, Inc. v. Forestadent USA, Inc., 2007 WL 1796214 (E.D. Mo. 6/19/07).

Orthoarm filed this patent infringement action against Forestadent USA. Orthoarm submitted discovery requests seeking financial documents of Forestadent Germany, Forestadent USA's parent company. Forestadent USA refused to produce the documents, claiming it did not have control of its parent company's financial documents.

The district court disagreed and issued an order compelling production of these documents. Guiding the court's analysis was the fact that the owners of Forestadent Germany are the officers and directors of Forestadent USA.

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The Arkansas Supreme Court affirmed class certification in Beverly Enterprises-Arkansas, Inc. v. Thomas, No. 06-877 (6/21/07).

Thomas filed a class action on behalf of 489 residents of the Batesville Nursing and Rehabilitation Center (an affiliate of Beverly Living Centers). The lawsuit stated claims for breach of contract, violations of the Arkansas Residents' Rights Act, medical malpractice and negligence. The trial court granted certification as to the statutory claims and breach of contract claims only.

The supreme court affirmed and made two key points to distinguish similar cases in other jurisdictions. First, Arkansas Rule 23 does not require the "rigorous analysis" of Federal Rule 23. Second, the class certification in this case does not extend to the personal injury claims, which will be addressed at the damages phase of the litigation.

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The District Court of Minnesota denied a motion for preliminary injunction based on patent infringement in Torspo Hockey Int'l, Inc. v. Kor Hockey Ltd., 2007 WL 1752725 (D. Minn. 6/18/07).

Kor Hockey owns a patent for its hockey skate design. Torspo Hockey initiated the lawsuit by seeking a declaration that its competing skate design does not infringe Kor's patent. Kor then counterclaimed and moved for a preliminary injunction. The court denied the motion largely in part because Kor only identified an arch shape in the skate as a point of novelty. The court observed that Torspo will likely prove that the arch shape is not novel.

This case also featured a new ripple resulting from eBay, Inc. v. MercExchange, LLC, 126 S.Ct. 1837 (2006), which held that irreparable harm cannot be presumed when evaluating permanent injunctions (detailed coverage at PatentlyO). The court held that eBay applies with equal force to preliminary injunctions and determined that Kor failed to establish irreparable harm.

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The District Court of Minnesota denied a motion to transfer in EcoWater Systems, LLC v. Hague Quality Water Int'l, 2007 WL 1725761 (D. Minn. 6/13/07).

EcoWater filed this false advertising lawsuit against Hague. Hague filed a motion to dismiss, or alternatively, to transfer the case to Ohio. Its main argument was that it did not have sufficient contacts in Minnesota to grant jurisdiction to Minnesota courts.

The court quickly dismissed these arguments. Deposition transcripts of Hague's 30(b)(6) witnesses demonstrated significant contacts with Minnesota, and the allegedly false statements were transmitted to Minnesota consumers.

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The Western District of Missouri denied a motion to dismiss in Spurgeon v. Scantlin, 2007 WL 1704937 (W.D. Mo. 6/11/07).

This case centers around the alternative-metal group Puddle of Mudd. Patrick Spurgeon filed this suit claiming that, in 1999, he and Puddle of Mudd front-man Wesley Scantlin co-authored 2 songs. In August 2001, Puddle of Mudd released an album with a song substantially similar to the disputed songs.

The lawsuit was styled as a declaratory action of co-ownership rather than one for copyright infringement. Spurgeon argued this imposed the 5-year statute of limitations rather than the standard 3-year period for copyright cases. The district court rejected this argument and held the 3-year limitations period would apply. The court denied the motion to dismiss but hinted that Puddle of Mudd will likely win this case at the summary judgment stage.

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The Arkansas Court of Appeals reversed a grant of default judgment in Valley v. Helena National Bank, No. 06-1075 (6/20/07).

Helena National Bank filed suit against Mr. J.F. Valley claiming default on a promissory note. Delivery was restricted to "J.F. Valley." The complaint and summons were served on "L. Danley," a secretary in Mr. Valley's building. The postman noticed his error two days later and had Mr. Valley sign the receipt card. However, Mr. Valley never received the complaint and summons. The trial court awarded default judgment to Helena National Bank.

The court of appeals reversed, holding that Mr. Valley's signature on the receipt card did not cure the defective service. Only evidence that Mr. Valley received the complaint and summons could cure the defect. The court opined that to hold otherwise would shift the burden of proof of service to the defendant.

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The Eastern District of Missouri granted a motion to remand in American Ass'n of Orthodontists v. Yellow Book USA, Inc., 2007 WL 1687259 (E.D. Mo. 6/8/07). This is the second round of litigation between these parties. In the first case, the AAO's false advertising claims were dismissed for lack of standing (previously posted 1/10/07).

The AAO has once again sued Yellow Book for listing dentists under the heading "Dentists-Orthodontists." This time, the AAO brought a state court claim alleging violation of Missouri deceptive advertising statutes. The state court removed the case to federal court on the basis of diversity of citizenship jurisdiction, although the AAO primarily seeks an injunction.

The district court remanded the case because Yellow Book's calculations of the value of the injunction were too speculative. The court noted that Yellow Book has a motion to dismiss pending, which must be taken up by the state court on remand. The case will likely be dismissed on grounds of claim preclusion and issue preclusion. It serves as a great example to include state law claims in federal intellectual property lawsuits.

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The Western District of Arkansas dismissed some of the counts in Illumination Station, Inc. v. Cook, 2007 WL 1624458 (W.D. Ark. 6/4/07) (previously posted on 4/13/07).

Illumination Station filed suit against defendants claiming trade secret misappropriation and 7 other counts. Defendants moved to dismiss 5 of the counts based on preemption. Their argument was based on R.K. Enterprises, LLC v. Pro-Comp Management, Inc., 356 Ark. 565 (2004) (previously posted 1/10/07), holding that the Arkansas Trade Secret Act preempts tort causes of action.

The court granted the motion to dismiss as to the counts for conversion and an accounting. Although the court denied the motion as to the remaining counts, the court granted the defendants leave to file a reply to the motion to dismiss.

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The District Court of Minnesota granted in part and denied in part a preliminary injunction based on copyright infringement in DF Institute, Inc. v. Marketshare Eds, 2007 WL 1589525 (D. Minn. 6/1/07).

This case involved Kaplan Professional Schools, the real estate exam branch of exam-preparation giant Kaplan. In 2006, Peggy McNamara enrolled in two of Kaplan's courses regarding the Minnesota real estate salesperson exam. In January 2007, McNamara opened her own company, Marketshare, which provided materials for passing the same exam. Kaplan immediately filed this suit, claiming the Marketshare course materials infringe Kaplan's copyrights.

After a thoughtful analysis, the court concluded that the bulk of Kaplan's material consists of noncopyrightable elements, such as statements of law and facts that students must learn. However, the court did find that Kaplan's hypothetical questions and answers are copyrightable expression. The court granted the preliminary injunction, but only as to these hypotheticals and answers, which represent a small percentage of the Kaplan course materials. The court denied the remainder of the motion.

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The District Court of Minnesota declined to stay a patent infringement case pending re-examination by the USPTO in Ecolab, Inc. v. FMC Corp., 2007 WL 1582677 (D. Minn. 5/30/07).

Ecolab filed this action against FMC in April 2005. In late 2006, Ecolab discovered prior art that it claims the USPTO failed to consider. Ecolab told FMC, but the parties filed cross motions for summary judgment rather than report the finding to the USPTO. The motions were denied, and a trial scheduled beginning July 2, 2007. In April 2007, Ecolab requested re-examination from the USPTO and moved the court to stay the proceedings pending the re-examination.

The court denied the request on two grounds. First, Ecolab requested the stay solely for a tactical advantage, as evidenced by its decision to continue litigating for 5 months after learning of the prior art. Second, a stay would only delay the proceedings and cause prejudice to FMC.

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The Arkansas Supreme Court declined to address two constitutional challenges to the Civil Justice Reform Act in Shipp v. Franklin, No. 07-22 (6/14/07).

Shipp was involved in a car wreck with Franklin and filed a lawsuit against him. Franklin filed a third-party complaint against Sanders, and Shipp amended her complaint to include Sanders as a defendant. Prior to trial, Shipp settled with Sanders. The remainder of the case proceeded to trial, with the jury finding Sanders 100% responsible for the accident.

On appeal, Shipp raised two constitutional challenges to the Civil Justice Reform Act. First, Shipp challenged the compensatory damages statute, which provides that the plaintiff can only present evidence of medical expenses that the plaintiff actually paid. See A.C.A. § 16-55-212. Shipp claims this statute violates the well-established collateral-source rule.

Second, Shipp challenged A.C.A. § 16-55-201, which provides that, for personal injury, the liability of each defendant is several only and not joint. Shipp claimed this statute improperly invades the power of the Arkansas Supreme Court to set rules of procedure.

The court decided not to address these questions on grounds of mootness. Because the jury returned a verdict finding Sanders 100% responsible, the case did not present joint tortfeasors to trigger analysis of these statutes. The jury verdict was affirmed.

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The Arkansas Supreme Court reversed summary judgment granted to the insured based on ambiguous language in State Auto Prop. & Cas. Ins. Co. v. The Arkansas Dept. of Environmental Quality, No. 06-1480 (6/14/07).

This case is centered upon gasoline pollution at the Harbor General Store in Mt. Ida, Arkansas. In 2001, Harbor purchased an insurance policy from State Auto. The policy contained an exclusion for pollution-related damage. In 2004, the ADEQ discovered a substantial leak in Harbor's fuel-dispensing system. Adjacent property owners, through their living trust, filed a lawsuit in Montgomery County and obtained a $750,000 judgment against Harbor.

State Auto filed a lawsuit in Pulaski County seeking a declaration that it had no liability on the judgment against Harbor. The trust moved for summary judgment on grounds that the definition of "pollutant" was ambiguous. The trial court granted the motion, claiming the same definition was deemed ambiguous in Minerva Enterprises, Inc. v. Bituminous Cas. Corp., 851 S.W. 2d 403 (Ark. 1993) and Anderson Gas & Propane, Inc. v. Westport Ins. Corp., 140 S.W.3d 504 (Ark.App. 2004).

On appeal, State Auto urged the court to reverse Minerva, arguing that the majority of jurisdictions have held the pollution exclusion language to be unambiguous. The court rejected this argument. However, the court did reverse because, unlike the insurer in Minerva, State Auto submitted numerous exhibits to explain the ambiguous terms. It is important to note that the court just instructed the trial court to consider State Auto's exhibits; the summary judgment motion is still live on remand.

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The Arkansas Court of Appeals dismissed an appeal because it was not properly perfected in Franks v. Mountain View, Arkansas Planning and Zoning Comm'n, No. 06-1234 (6/13/07).

The Frankses developed a subdivision with a common plan of development. In October 2003, the Mountain View Planning and Zoning Commission and the Mountain View City Council permitted a homeowner in the subdivision make curb cuts. The Frankses filed an appeal to circuit court in November 2004. The trial court granted summary judgment to the defendants because the Frankses failed to comply with District Court Rule 9.

The court of appeals affirmed, noting that Rule 9 required the Frankses to, within 30 days of the City Council's action, file a certified copy of the record or an affidavit stating they could not timely file the record. As the court noted, "Strict compliance with the requirements of Rule 9 is necessary; substantial compliance will not suffice."

In an interesting concurring opinion, Judge Marshall argues that the standard should change to substantial compliance. Under that standard, he argues the Frankses' appeal would have been perfected. 

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The U.S. Supreme Court reversed the Eighth Circuit and held that Arkansas state court is the proper forum for the pending class action against Philip Morris in Watson v. Philip Morris Cos., Inc., No. 05-1284 (6/11/07).

Plaintiffs filed a class action suit against Philip Morris claiming deceptive trade practices. Plaintiffs claim Philip Morris altered the tests of its light cigarettes to register lower levels of tar and nicotine than what are actually delivered to consumers. Philip Morris removed the case under the federal officer removal statute. See 28 U.S.C. § 1442(A)(1). Philip Morris argued that, since it was subject to intensive review by the Federal Trade Commission, it was a federal official. The district court agreed, and the Eighth Circuit affirmed (opinion here).

The Supreme Court reversed, reasoning that a private firm's compliance with federal laws and regulations cannot rise the private firm to the level of a federal official. The case will return to Arkansas state court, and protracted litigation can be expected.

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The Arkansas Supreme Court affirmed a denial of a motion to dismiss based on revocation of corporate charter in Omni Holding and Development Corp. v. C.A.G. Investments, Inc., No. 06-1136 (6/7/07).

C.A.G. Investments filed suit against Omni Holding claiming that Omni held real property owned by C.A.G. Prior to the suit, C.A.G.'s corporate charter was revoked. However, C.A.G. was reinstated after the lawsuit had been filed. Omni moved to dismiss, arguing that C.A.G. lacked standing to sue because its charter was revoked.

This was the supreme court's first opportunity to examine the new reinstatement statute, which provides that "Reinstatement shall be retroactive to the time that the corporations authority to do business in the state was declared forfeited." See A.C.A. § 26-54-112(a)(1)(A)(ii). The court determined that reinstatement granted C.A.G. continuous existence as though the revocation had never occurred.  

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The Arkansas Supreme Court granted a writ of prohibition denying jurisdiction to the trial court in CenterPoint Energy, Inc. v. Miller County Circuit Court, No. 06-1294 (6/7/07).

Plaintiffs filed a class action against CenterPoint Energy and other companies alleging a scheme to increase energy rates to Texas and Arkansas consumers. The complaint stated claims for fraud and unjust enrichment rather than increased rates. The defendants moved to dismiss, arguing that the Arkansas Public Service Commission ("APSC") has exclusive jurisdiction of disputes regarding energy rates.

The trial court denied the motion to dismiss, and the defendants filed a writ of prohibition. The APSC submitted an amicus curiae brief supporting the grant of the writ. The supreme court reviewed similar cases from numerous other states that held jurisdiction lied in public utility commissions. Moreover, the court found persuasive that the Legislature granted the APSC "sole and exclusive jurisdiction" over public utility rates. See A.C.A. § 23-4-201(a)(1).  

The supreme court granted the writ, but only to the extent it placed jurisdiction of Arkansas consumers under the APSC. The court refused to exercise jurisdiction over Texas consumers in this case.

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The Arkansas Court of Appeals reversed the grant of a new trial in Bailey v. McRoy, No. 06-878 (6/6/07).

McRoy filed a lawsuit against Bailey for a car wreck that occurred between the parties. Pursuant to Rule 68, Bailey made an offer of judgment in the amount of $5,000. The jury returned a verdict for Bailey, and Bailey moved to assess the costs. The trial court granted McRoy's motion for new trial and denied Bailey's motion for costs.

The court of appeals reversed both decisions. Regarding the new trial, the court held "the trial judge erroneously substituted his own view of the evidence for that of the jury." Because a new trial was not warranted, Bailey was entitled to recover costs incurred after the offer of judgment was made.  

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Judge Lindsay dismissed the lawsuit involving the infamous Teresa Prewett email to Mitch Mustain (the lawsuit was previously posted 4/26/07). According to the Ft. Smith Times Record, Judge Lindsay stated, "I have not been shown any reason that a state court should get involved in the administration of the football program or athletic program" (full article here). The court did give the plaintiff 20 days to amend the pleadings on two of the counts that were dismissed.

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The Arkansas Supreme Court dismissed an appeal in National Home Centers, Inc. v Coleman, No. 06-1315 (5/31/07).

National Home Centers filed a foreclosure complaint against Regions Bank, Coleman Homes, LLC, and Newoods, Inc. National was attempting to have its interest in certain property declared superior to the other parties' interests. The trial court granted summary judgment to Regions and Coleman. Newoods never filed an appearance. Although the Court orally granted judgment to National, the oral ruling was never reduced to a written judgment.

The Arkansas Supreme Court reversed on two grounds. First, the oral ruling was insufficient to count as a final judgment as to Newoods. Second, National failed to show in the record that Newoods had been properly served. The appeal was dismissed without prejudice.

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The Arkansas Supreme Court issued the mandate to finally conclude the long-running Lake View case in Lake View Sch. Dist. No. 25 v. Huckabee, No. 01-836 (5/31/07). Public school funding is now in constitutional compliance.

This historic case was filed August 19, 1992 (to put in perspective, during Bill Clinton's last term as governor of Arkansas). The case achieved class action status in 1996 and produced a number of important decisions. Its significance was not lost on the Court--the opinion was signed individually by each participating justice. The Court gave its sincere thanks to the parties who had worked for so long on this case:

[W]e are now able to direct the issuance of the mandate in this case due to the hard work of the Masters, the General Assembly, and the executive branch. This court, the people of Arkansas, and the generations to come are indebted to them for their commitment to education.

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In Arkansas Diagnostic Center, P.A. v. Dr. Abdalla Tahiri, M.D., No. 06-667, the Arkansas Supreme Court holds that the Federal Arbitration Act does not reach the employment contract of a local doctor who treats local patients at a local clinic, notwithstanding the local clinic's use of out-of-state medical supply companies, business with out-of-state insurance companies, and treatment of three out-of-state patients.

Dr. Tahiri had an employment contract containing an arbitration provision. He sued the Clinic, which moved to compel arbitration. Pulaski County Circuit Judge Ellen Brantley denied the motion, and the Arkansas Supreme Court affirmed.

The Arkansas Uniform Arbitration Act does not apply to employment contracts, but the FAA does. Thus, the question on appeal was whether the Federal Arbitration Act, which applies to any  "contract evidencing a transaction involving commerce," applied to Dr. Tahiri's contract.

The Court noted that the United States Supreme Court has held that the Act extends to "the broadest permissible exercise of Congress' Commerce Clause power." But at the same time, the United States Supreme Court has also held that the Act does not preempt state arbitration acts.

In this case, the proof offered by the clinic of its out-of-state activities--using out-of-state medical supply companies, dealing with out-of-state insurance companies, even treating three out of state patients--didn't quite reach the threshold. The opinion implies (and Justice Brown's concurrence makes explicit) that the Clinic did not prove a sufficient causal nexus between Dr. Tahiri's activities and the Clinic's limited out-of-state contacts.

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